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S&P Global — 11 December 2024
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
European countries enjoy neither the higher growth rates of the US nor the rapid growth of emerging markets. Europe has had decades of unspectacular growth with brief periods of contraction. Europe avoids economic volatility. But policy changes in the US — Europe’s largest trading partner — and ongoing geopolitical conflicts in the Middle East and Ukraine threaten to introduce a period of change. High-profile reports from Christian Noyer, former Governor of the Bank of France, and Enrico Letta and Mario Draghi, both former Italian prime ministers, call for Europe to boost its competitiveness with the US and China, unify the company’s capital markets, streamline regulation and increase military expenditures. Attempting these changes could introduce considerable economic uncertainty, but not addressing them could lead to economic irrelevance.
Sylvain Broyer, chief economist for Europe, the Middle East and Africa at S&P Global Ratings, projects that eurozone GDP growth will reach 0.8% in 2024 and 1.2% in 2025. Germany’s GDP growth is forecast to underperform the eurozone average, while Spain is projected to continue outperforming. Inflation appears to be stabilizing close to European Central Bank targets, with projected inflation at 2.4% for 2024. Given moderating inflation, S&P Global Ratings anticipates that the European Central Bank will increase the pace of rate cuts, potentially reaching a neutral rate of 2.5% before the summer of 2025.
These projections could change depending on the outcome of upcoming policy changes. First, the election of Donald Trump as US president creates challenges for Europe. The US received 17% of EU exports in 2023, and the incoming administration’s threat of a universal 10% tariff on imports could reduce real GDP by about 0.2% in the eurozone. Second, a new European Council president, a new European Commission and a new rotating EU presidency could implement policy changes in Europe to increase competitiveness and reduce regulation. Finally, the reinstatement of European budgetary rules will keep fiscal policy restrictive across the eurozone and could dampen domestic demand.
Europe cannot ignore armed conflicts on its doorstep. Russia and Israel appear emboldened by recent military successes. With an incoming Trump administration showing low commitment to NATO security guarantees, European countries may need to increase military spending to maintain security and aid Ukraine.
According to S&P Global Ratings, European credit conditions may be pressured by this geopolitical instability. However, the forecast projects a modest 6.9% increase in median earnings for European-rated nonfinancial corporates in 2025 and a stable outlook for European banks. Yield curves could steepen for European borrowers as capital flows toward US markets. But a potentially stronger US dollar could increase the competitiveness of European exports, and structural risks such as climate change and cyberattacks will remain for European economies.
Today is Wednesday, December 11, 2024, and here is today’s essential intelligence.
The UN's big annual climate change conference known as COP29 wrapped up in November 2024 in Baku, Azerbaijan. In this episode of the ESG Insider podcast, we sit down in Baku with Marcos Neto, assistant secretary general and director of the UN Development Programme’s Bureau of Policy and Programme Support.
—Listen and subscribe to the podcast from S&P Global Sustainable1
Shortly after Trump’s presidential election win in the US, the Federal Reserve reaffirmed its view from September that the job market was easing and inflation was moving toward the 2% target. It delivered a 25 bps interest rate cut on Nov. 7, with several nations that peg their currencies to the US dollar following suit. In Europe, central banks in the UK and Sweden implemented rate cuts. In the Asia-Pacific region, the Reserve Bank of New Zealand lowered its policy rate by 50 bps, while central banks in South Korea and Hong Kong cut their rates by 25 bps.
—Read the article from S&P Dow Jones Indices
Various health insurance stocks in the US were down Dec. 6 as the managed care space reeled from the apparently targeted killing of UnitedHealthcare Inc. CEO Brian Thompson. Thompson, 50, was shot and killed by an unknown assailant on his way to a UnitedHealth Group Inc. investor conference the morning of Dec. 4 in Manhattan, New York. UnitedHealth's stock had initially been in positive territory this week after it released adjusted 2025 earnings-per-share figures. But UnitedHealth's stock fell 5.1% by close of trading Dec. 5 compared with the last of trading in the prior week.
—Read the article from S&P Global Market Intelligence
Bunker markets at Mumbai saw a fall in demand for bunker fuels due to the inconsistency in availability of supplies at the port, while despite plentiful supplies, traders across Sri Lanka said the drop in the number of ship calls reduced the total bunker demand at the port. According to data from S&P Global Commodities at Sea, total bunkering and ship-to-ship calls in Mumbai slid 15% month on month in November to reach 443, from 551 calls recorded in October.
—Read the article from S&P Global Commodity Insights
South Korea's energy-related diplomatic functions are currently stalled, as the effort to establish the nation's new leadership structure and foreign affairs system has encountered a setback after ruling party lawmakers boycotted a motion to impeach President Yoon Suk-yeol. Although President Yoon has neither been arrested nor impeached over the martial law attempt, the nation is effectively experiencing a leadership vacuum, as both the government and the entire cabinet have lost public support and credibility.
—Read the article from S&P Global Commodity Insights
Cyber risks are in a constant state of flux, characterized by cyber attacks and incidents that are increasing in frequency and sophistication, and cyber security that is maturing in application and engaged in a technology arms race. Broadly speaking, cyber attacks affecting structured finance have shared some key similarities. They include quick resolution of the event, a lack of contagion from affected systems to other parts of the transactions and timing that did not generally coincide with key securitization-related tasks (such as calculating and transferring remittance amounts).
—Read the article from S&P Global Ratings
Join our S&P Global Ratings US Public Finance team for our 2025 Outlook Webinar series. Sector leads and senior team analysts will lead discussions around our published outlooks and sector views. We will answer your questions live during the webinars.
—Register for the event series from S&P Global Ratings